Question about cap rates

[Peyton LaBarbera]

So this confused me a bit... I saw a listing for a 15-unit apartment building that is for sale and the property has a 5.3 cap rate, this isn't the issue.

The issue is in the listing description the agent said the building could have rent growth potential based on the rising rent prices in the area which she said would bring the property to a 6.6 cap

Now my question is why would I buy a property for 2.5 million when with this new expected cap rate the property would tank to just under 2 million

NOI is roughly 132,000 and most units are in pretty good shape

Another note is the average cap rate in the area the property is located in is a 6.4 cap

[Russell Brazil]

Quote from @Peyton LaBarbera:

So this confused me a bit... I saw a listing for a 15-unit apartment building that is for sale and the property has a 5.3 cap rate, this isn't the issue.

The issue is in the listing description the agent said the building could have rent growth potential based on the rising rent prices in the area which she said would bring the property to a 6.6 cap

Now my question is why would I buy a property for 2.5 million when with this new expected cap rate the property would tank to just under 2 million

NOI is roughly 132,000 and most units are in pretty good shape

Another note is the average cap rate in the area the property is located in is a 6.4 cap

So they are saying the NOI is currently $132,500 (5.3%) but that either through rent raises or optiminization that the NOI could be increases to $165,000 (6.6%).

They are not saying the value would drop to create that cap rate.